GCC insurers weather the geopolitical storm

The Middle East conflict is impacting Gulf ins. company growth, but the risk remains under control. Saudi Arabia, Kuwait, Qatar, and the UAE are not expected to see a major hit to profitability, but the war is still quietly reshaping the ins. sector and hitting top lines, Associate Director at S&P Global Ratings Mario Chakar said in a webinar attended by EnterpriseAM.

The expectations: Saudi Arabia — the region’s fastest-growing market over the past several years — is expected to decelerate to 8-12% growth this year from a run of double digits, and the UAE is set to drop to around 10% from nearly 20% in 2025, while a broader economic slowdown quietly reduces claims as fewer people drive and travel, Director and Lead Analyst Emir Mujkic said. Kuwait is expected to hold at 6-8%, largely carried by Vision 2035 infrastructure spending.

The pressure that matters is structural, and it sits at the bottom of the market. In Saudi Arabia, Bupa and Tawuniya are racking up most of the income, while smaller players fight over what’s left, a gap the agency expects will widen, Chakar said. Motor underwriting ran a 107% combined ratio last year (anything above 100% loses money), and a soft pricing cycle that lasted longer than S&P expected only began correcting late in 2025.

A new risk-based capital regime is set to take effect on 1 January 2027, with a soft launch this year. Seven listed Saudi insurers already carry accumulated losses above 20% of share capital, and Chakar expects the rules to catalyze consolidation among the weakest. The market has already shrunk from 33-34 companies a decade ago to 25 listed today, against just 11 listed banks. Expect more mergers through 2026-2027, although S&P says that deals have moved more slowly than billed, with signed MoUs stalling before close.

Qatar's catalyst is a delayed law: A mandatory health ins. scheme, on the books since 2022 and pushed back repeatedly, is expected to lift market growth from around 5% this year to 15-20% once live, mirroring what happened when Dubai, Abu Dhabi, and Saudi mandated coverage. S&P Associate Director Sachin Sahni said Qatar is the most profitable of the four markets, with 85-90% combined ratios and 6-8% ROE, but warned that ins. companies may need to raise capital to write the new business.

The UAE is crowded and cushioned. The top three companies hold roughly 50% of the ins. market, and about half of all business is ceded to reinsurers — a margin drag that earned its keep during the 2024 floods, Mujkic said. Too many companies writing similar coverage keeps consolidation pressure on, with several listed players running near or below minimum solvency requirements.

The diversification trap. A handful of GCC ins. companies are pushing into India, Turkey, and Africa for growth — all markets S&P rates higher-risk. Turkish underwriting loses money across the board (110-115% combined ratios, propped up only by ~40% deposit yields against 30%-plus inflation) and Indian margins are thin. Growth that comes with deteriorating performance can be a ratings negative, not a diversification win, according to Sahni.

MARKETS THIS MORNING-

Asia-Pacific markets are trading mostly higher this morning, buoyed by investor optimism ahead of the upcoming earnings season. South Korea’s Kospi is up 0.7%, and the Shanghai Composite is up 0.2%. Japan’s Nikkei dipped 0.3%, and the Hang Seng is flat. Wall Street futures are in the green.

THE CLOSING BELL-

The EGX30 rose 1.2% at yesterday’s close on turnover of EGP 8.1 bn (6.6% below the 90-day average). Local investors were the sole net buyers. The index is up 22.2% YTD.

In the green: Edita (+3.7%), E-finance (+3.7%), and Kima (+3.4%).

In the red: GB Corp (-2.3%), Orascom Construction (-1.6%), and Eastern Company (-0.5%).